FedEx corporation and Bowmans strategy clock - Assignment Example

? FedEx Corporation and Bowman’s Strategy Clock Table of Contents Topic Page no. Summary …………………………………………………………………………..3 Introduction…………………………………………………………………………3 Bowman’s strategic clock and its success factors…………………………………..4 Meeting the critical success factors by FedEx………………………………………5 Generic strategies taken by FedEx………………………………………………….7 Key resources and capabilities of FedEx……………………………………………8 Strategies of FedEx in respect to suitability, feasibility, and acceptability …………………………………………………………………..10 Conclusion………………………………………………………………………….11 References Summary The Bowman’s Strategy Clock considers the different strategy options required for increasing the competitiveness of firms and influence its sustainable growth. The FedEx, the biggest delivery company of the United States of America followed the strategy options prescribed by Bowman to gain sustainability through the achievement of competitive advantages over the other firms of the industry. The paper evaluates the strategies of FedEx with respect to the Bowman’s Strategy Clock in the context of the present day world. Introduction The classic questions asked by the business professionals though generations are that in the situation of this tremendous competition among the companies how does one among the others gain competitive advantage over the other companies and how the firms obtain different degrees of success selling the same finite number of more or less homogenous products at more or less same prices. These questions were tried to be answered by Michael Porter in his book ‘Competitive strategy’ in the year 1980 where competition is reduced to three strategies that are classic in itself. They were the strategy of cost leadership, that of differentiation of products and segmentation of the markets. These strategies were extended in Bowman’s strategic clock theory in the year 1996. (Bowman Strategy Clock, 2009) FedEx caters to global customers and business houses with a wide range of application, business packages as well as e-commerce services. It occupies the most trusted employer’s position in the world, supporting above 275000 human resources and contractors and maintaining immense professional benchmarks and customers’ requirements on regular basis (FedEx, 2011). Taking up the case of FedEx can serve as a case of analysis for the paper and the issues taken up for study cover the strategies of the company and an evaluation of the current and future position of the same. Bowman’s strategic clock and its success factors According to the Bowman’s strategic clock, there are six core strategic options (overall eight options) if properly represented, resemble the pattern of a clock hence named ‘the strategic clock’. According to Bowman, the first strategic option is low added value, which is likely to be specified by segments. The second strategic option is the low price of the products that helps in reducing the risks associated with price war and that with low margins. The third strategic option is hybrid that considers a base of low cost, availability of the options of reinvestment in low priced products and differentiation. The fourth strategic option is differentiation of products that can again be subdivided into two separate categories. The first category consists of those without a price premium that helps in yielding benefits from the market share through the process of value addition as perceived by the users. The second category is with the system of price premium that contains within itself sufficient added values as perceived so as to bear the price premium. The fifth strategy is called focused differentiation that considers adding value to a particular segment as perceived to possess the warranty of a premium price. The sixth strategic option is to increase the price or the standard of the products that can help in resulting higher margins for the company if the other competitive firms in the market are unable to value properly the risk associated with the loss of the market shares of those. The seventh strategic option as prescribed by Bowman is feasible only in the situation of a monopoly or for a monopoly firm. The strategy prescribed is increased price of the product or lowering of the value. The last option strategize is the low value or low standard price which in certain situations if not implemented properly can results in the loss of the market share for the firms. (Jeffs, 2008; MindTools, 2011) Meeting the critical success factors by FedEx Fed Ex Express is the largest shipping provider with above 3.5 million packages being delivered to above 220 nations and regions and has more than 2000 stores. The company maintains around 665 aircraft and above 41000 motor vehicles along with trailers (FedEx Corporation, 2011). The networking strategy of the company is the key role of defeating the competitiveness of the rival firms of the company. The first strategy needed for the success of the express delivery system is that the customers should be well informed about the exact location of the products at every step. The FedEx well maintained this activity and according to the law of the company, the basic premise is that information about the location and the movement of the parcel is as important to be movable as the movement of the parcel itself. The customers could call upon any time for information about the exact location of their parcel during the process of the delivery. It is studied that very few competitors of the FedEx are able to locate the accurate position of their parcels as done by FedEx though the formers are possibly trying to upgrade themselves. Sometimes higher prices of delivery in comparison to the other competing firms are charged by the company for certain classes of delivery. However, that ensures the better tuning of the delivery system and hence does not fall against the interest of the customers. Data reveals that the operating margin the company enjoyed in its domestic shipment is about 8% more than that of Airborne express, another company in the same field of delivery. Most delivery companies use passenger planes for delivery, but FedEx possesses a ‘package air delivery system’ in which the parcels are being delivered in the night according to the business needs and are not bound to the timings of the passenger planes. Moreover, there is a use of an automatic keyless system of entry and also ignition that facilitates the proper and quick functioning of the system. Thus, the key factors behind the success of the company are the technology, marketing, and customer service. Technology helps the earnings of the company and makes the company run. Secondly, to acquire more business prospects people need to be familiar with the services provided by the company and with its name that can be acquired through system of proper marketing of the products. Thirdly, the customers need to be satisfied by the service provided by the company for its enlargement and growth. FedEx had been able to follow these strategic factors and hence able to settle itself as global delivery service provider enjoying competitive advantages. (A critical analysis and evaluation of FedEx Corporation, 2009: Crockett, 1989, pp 19-20) Generic strategies taken by FedEx Prominence to substantial low cost is given by the generic approach to competitive advantage of Michael Porter. According to the Strategy Clock, the customers are given the prime importance and more prominence than the competitive advantages enjoyed by the firm. The competitive advantage and the product unless valued by the customers of the firm will add no value to the profitability and advantage of the company. (Jeffs, 2008, p.49; Johnson, 2008) The second generic strategy is differentiation of the products so as to make the product of the individual firm unique in the industry. Moreover, the customers are also in the need of being perceive that the products have certain features that are not found in the products of the competing firms. Adding uniqueness to the products may add to the cost incurred in producing the products but the marginal benefits that the customer enjoy need to be greater than the marginal cost. This is the key requirement of the success of the differentiation strategy. Differentiation if succeed may add to the cost advantage of the firm in long term as the customers become addicted to the brand loyalty. (Thomas, 2011) FedEx undertook the differentiation of product strategy generic competitiveness that is the fourth strategy option of the Strategy Clock. For instance FedEx Ground has in store small-package frame of delivery for North American customers and less than truckload (LTL) carrying capacity which take over the heavier shipments. The office units of the firm keep a wide range of business services and even provide themselves as retail centers for the other units of the company (FedEx Corporation, 2011). FedEx splits its business world into various sub business units at every corporate level and to increase the market share of the parent company started the policy of acquisition of new firms. (FedEx, 2011) Key resources and capabilities of FedEx It can be said the core competency of FedEx, that is ultimately required for the profitability and the sustainability of a firm is the logistics management. (Core competencies, 2011) The technological innovations made by the firm has been the major way of adding to the value of the firm and reducing the cost that also enables in finding competitive advantages over the others. The changing and the improving organizational structure of the company also contributed to the addition in the value of the firm. With the segmentation of the product, process through the creation of different subsidiary industries under the operational control of the parent company improved the communication system within the industries. Moreover, all the subsidiary industries work under the brand name of FedEx hence adding more to the profit of the organization. The focus of the company in the major detailing of the products and the services provided adds the advantage in attracting the interest of the customers. The guarantee of the timely service provided by the company has enabled in creating a meticulously cultivated image that increase its market share hence adding to the competitive advantage of the firm and its profitability. (A critical analysis and evaluation of FedEx Corporation, 2009; Grant, 2005, p.153: Logistics business review, 2010; Strategy, Resource and capabilities, n.d) Sending eight packages on the first night the firm experienced an astonishing improvement in handling 9.8 million shipments per day within the first few years of the twenty first century. FedEx serves 220 countries, run through 375 airports and possess a daily lifting capacity of 12 million kilograms per day. FedEx is referred as a company that offered high quality services at low cost. (Infrastructure and capability, n.d: Collier, and summers, 2007 p271: Corporate and business strategy, 2005) By 2010, the company has met revenues of $34,734 million with 141000 employees and reflects a profit margin of 72.5 percent in 2010 compared to 70.7 percent in 2008 (FedEx Corporation, 2011). Strategies of FedEx in respect to suitability, feasibility, and acceptability The criterion of suitability is use to access the extent of the fitting of a proposed strategy and its contribution to the improvement of the competitive position of the firm and its sustainability. Feasibility of any strategy is the assessment of the successful implementation of a particular strategy. Acceptability on the other hand relates strongly to the people’s expectation about a particular strategy option taken by the firm. (Evaluation Criteria, n.d) The unique operating strategies undertaken by FedEx are the collective competition that enables each and every sub segment of the company to use the brand name for the marketing of their products. The second strategy is the independent operation of the firms under the company that focuses on meeting the distinct needs of the customers and handles them separately with proper individual care. The third strategy is the management of the firm collaboratively that is to work together under the loyalty of the workforce the customers and the investors of the company. All these strategies valued the people in promoting diversity, the service with full positive spirit, the innovation and the integrity of the organization increasing efficiency, reliability, and honesty. Thus, the three requirements for the proper fulfillment of the implementation of strategies are subjected by the FedEx in choosing its strategy options. (Mission, Strategy, values, 2011). However the shipping value of the overnight services of FedEx had been reported to fall in its volume from august 2008 and the customers were reported to avail the ground system more because of the overshooting rates imposed by the firm. However, FedEx was still able to earn profit and cover the fixed costs of the firm with higher profit margins through the transfer of the envelopes and the boxes. (Phillips, 2008) Conclusion To conclude the study it can be said that the strategies implemented by FedEx are effective if they can be properly implemented towards the interest of the customers, keeping in mind their needs and their interest for the demand of the products. With the time, it is also expected that the firm will be able to convince the customers for the payment of higher charges of the delivery by the strategy of providing them with certain facilities than the other competing firms of the industry. 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